5 Minute Market Update – February 27, 2017

Trust Dale CFGI am happy to present this week’s market commentary from FormulaFolio Investments. The goal is to give our clients and friends a simple way to see everything they need to know about the financial markets on a weekly basis, in 5 minutes or less. After all, investing should be simple, not complicated.

Market Update

Equities: Broad equity markets finished the week mixed with large-cap US stocks experiencing the largest gains. S&P 500 sectors finished the week mostly positive as defensive sectors generally outperformed cyclical sectors.

So far in 2017 technology, healthcare, and consumer staples are the strongest performers while telecommunications and energy are the only sectors with negative performance year-to-date.

Commodities: Commodities were negative for the week, though oil prices rose 1.10%. Speculation regarding OPEC production cuts has pushed oil prices up since late November, but an increase in US production has given investors pause so far in 2017. Gold prices increased for the eighth time in nine weeks, posting a 1.56% gain.

Bonds: The 10-year treasury yield fell from 2.42% to 2.31%, leading to the strongest gains for treasury and aggregate bonds since the last week of 2016.

High yield bonds were positive as credit spreads remain relatively low and riskier assets performed moderately well.

Most indices are currently positive for 2017, with large-cap US stocks leading the way.

Screen Shot 2017-02-27 at 9.09.02 AM

Lesson to be learned: Fred Schwed Jr. once said “Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.” It can be difficult to avoid the urge of speculating about “hot” stock tips which can allegedly make you rich overnight. The truth, however, is markets often act in ways that are unforeseen. This is why it is important to maintain a smart and disciplined investment strategy while avoiding knee-jerk reactions based on daily market noise.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear).

In a nutshell, we want the RPI to be low on the scale of 1 to 100.  For the US Equity Bull/Bear indicator, we want it to read least 67% bullish.  When those two things occur, our research shows market performance is strongest and least volatile.

The Recession Probability Index (RPI) has a current reading of 25.44, forecasting further economic growth and not warning of a recession at this time. The Bull/Bear indicator is currently 100% bullish. This means our models believe there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

Screen Shot 2017-02-27 at 9.09.17 AM

Weekly Comments & Charts

The S&P 500 finished the week positive and remains well above the support level that was set following the breakout in July last year. The most recent positive price movement snapped a narrow trading range experienced by the S&P 500, in which the Index had closed within a 1.75% range for 31 consecutive trading days. It appears that US equity markets are currently in an intermediate-term upward trend as many indices have reached new all time highs multiple times in recent weeks. The coming weeks should continue to give valuable insight about the near-term direction of the S&P 500, but it seems the sideways/downward pattern experienced from 2015 through mid-2016 has shifted to a more bullish pattern for now.

Screen Shot 2017-02-27 at 9.11.19 AM

Many US stock markets experienced gains for the fifth consecutive week as indices continue to reach new all-time highs.

The recent run-up can largely be attributed to speculation surrounding expected tax cuts and other policies leading to stronger US economic growth, but there is also fundamental support to the current rally.

So far, 92% of companies in the S&P 500 have reported earnings for Q4 2016. On December 31, total Q4 S&P 500 earnings were expected to grow only 3.1% year-over-year. However, after numerous upside surprises, the blended growth estimate has increased to 4.9%. As of today, 66% of reporting S&P 500 companies have beat their expected earnings estimate. Every economic sector, other than telecommunications, has experienced an overall positive earnings surprises.

This stronger than expected earnings growth data is good news as the forward 12-month price-to-earnings (P/E) ratio is currently at its highest level since 2004. The forward P/E ratio of 17.7 is well above the 5-year and 10-year average levels of 15.2 and 14.4. An inflated P/E ratio can indicate an overvalued market. To fall back to the average P/E ratios we would need to see earnings continue to increase, stock prices start to decrease, or a combination of both. If earnings continue to grow, it could help the recent bull-market continue through 2017 by keeping valuations at a reasonable level.

Though US stocks appear to be on track to continue performing strongly for the near future, it is important to include other broad asset classes in your portfolio for more consistent, more stable longer-term results.

While market trends and history are useful for study, there’s always more to investing than just the charts and trends.

As investors, we need to stay committed to our long-term financial goals. All the short-term news and market movements can be the most debilitating of all when it comes to making sound investment decisions; especially if we allow them to influence knee-jerk decisions.

More to come soon.  Stay tuned.

Regards,

Phil Calandra

The post 5 Minute Market Update – February 27, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – February 22, 2017

I am happy to present this week’s market commentary from FormulaFolio Investments. The goal is to give our clients and friends a simple way to see everything they need to know about the financial markets on a weekly basis, in 5 minutes or less. After all, investing should be simple, not complicated.

Market Update

Equities: Broad equity markets finished positive for the week with large-cap US stocks experiencing the largest gains. S&P 500 sectors finished the week mostly positive as cyclical sectors generally outperformed defensive sectors.

So far in 2017 technology, healthcare, and consumer discretionary are the strongest performers while telecommunications and energy are the only sectors with negative performance year-to-date.

Commodities: Commodities were negative for the week as oil prices fell 0.85%. Speculation regarding OPEC production cuts has pushed oil prices up since late November, but an increase in US production has given investors pause so far in 2017. Gold prices increased 0.26% as gold remains at its highest level since the beginning of November.

Bonds: The 10-year treasury yield increased slightly from 2.41% to 2.42% as treasury and aggregate bonds finished the week mostly flat.

High yield bonds were positive as riskier assets performed well.

Most indices are currently positive for 2017, with large-cap US stocks leading the way.

Screen Shot 2017-02-21 at 8.49.37 AM

Lesson to be learned: Fred Schwed Jr. once said “Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.” It can be difficult to avoid the urge of speculating about “hot” stock tips which can allegedly make you rich overnight. The truth, however, is markets often act in ways that are unforeseen. This is why it is important to maintain a smart and disciplined investment strategy while avoiding knee-jerk reactions based on daily market noise.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear).

In a nutshell, we want the RPI to be low on the scale of 1 to 100.  For the US Equity Bull/Bear indicator, we want it to read least 67% bullish.  When those two things occur, our research shows market performance is strongest and least volatile.

The Recession Probability Index (RPI) has a current reading of 25.44, forecasting further economic growth and not warning of a recession at this time. The Bull/Bear indicator is currently 100% bullish. This means our models believe there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

Screen Shot 2017-02-21 at 8.49.47 AM

Weekly Comments & Charts

The S&P 500 finished the week positive and remains well above the support level that was set following the breakout in July last year. The most recent positive price movement snapped a narrow trading range experienced by the S&P 500, in which the Index had closed within a 1.75% range for 31 consecutive trading days. It appears that US equity markets are currently in an intermediate-term upward trend as many indices have reached new all time highs multiple times in recent weeks. The coming weeks should continue to give valuable insight about the near-term direction of the S&P 500, but it seems the sideways/downward pattern experienced from 2015 through mid-2016 has shifted to a more bullish pattern for now.

Screen Shot 2017-02-21 at 8.51.08 AM

US stock markets experienced gains for the fourth consecutive week and seem to have regained momentum for the time-being.

As US stock markets continue to climb to new highs, a large amount of investor attention remains on interest rates. In her first semiannual testimony to the Senate on monetary policy, Federal Reserve Chair Janet Yellen said the central bank can continue to raise interest rates slowly and it would be “unwise” to wait too long to further increase rates. According to Yellen, delaying rate hikes for too long could potentially result in the Fed increasing rates rapidly in the future, which could disrupt financial markets and push the economy into a recession.

The Fed had previously projected three rate increases in 2017, but many experts project there will only be two increases this year. Yellen declined to specify whether or not there was a possibility for a rate hike in March, as the Fed remains open to adapting to changing economic circumstances as they arise. One key thing the Fed is watching is the fiscal policy promised by the Trump administration, which could accelerate economic growth and inflation faster than expected.

Though the pace of interest rate hikes is still somewhat unclear, it seems there will be further rate hikes throughout 2017, lifting rates from the historically low levels experienced in recent years. The tone of the next Fed meeting, scheduled for March 14 – 15, should give valuable insight to the path of interest rates in the near-term.

While market trends and history are useful for study, there’s always more to investing than just the charts and trends.

As investors, we need to stay committed to our long-term financial goals. All the short-term news and market movements can be the most debilitating of all when it comes to making sound investment decisions; especially if we allow them to influence knee-jerk decisions.

More to come soon.  Stay tuned.

Regards,

Phil Calandra

The post 5 Minute Market Update – February 22, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – February 14, 2017

Trust Dale CFGMarket Update

Equities: Broad equity markets finished mostly positive for the week with large-cap US stocks experiencing the largest gains. S&P 500 sectors finished the week mostly positive as cyclical sectors generally outperformed defensive sectors.

So far in 2017 technology, consumer discretionary, and materials are the strongest performers while telecommunications and energy are the only sectors with negative performance year-to-date.

Commodities: Commodities were positive for the week as oil prices remained mostly flat. Speculation regarding OPEC production cuts has pushed oil prices up since late November, but an increase in US production has given investors pause so far in 2017. Gold prices increased 1.30% as gold remains at its highest level since the beginning of November.

Bonds: The 10-year treasury yield fell from 2.49% to 2.41% as treasury and aggregate bonds finished the week positive.

High yield bonds were mostly flat as credit spreads remained relatively stable for the week.

Most indices are currently positive for 2017, with international stocks leading the way.

Screen Shot 2017-02-13 at 8.59.43 AM

Lesson to be learned: Fred Schwed Jr. once said “Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.” It can be difficult to avoid the urge of speculating about “hot” stock tips which can allegedly make you rich overnight. The truth, however, is markets often act in ways that are unforeseen. This is why it is important to maintain a smart and disciplined investment strategy while avoiding knee-jerk reactions based on daily market noise.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear).

In a nutshell, we want the RPI to be low on the scale of 1 to 100.  For the US Equity Bull/Bear indicator, we want it to read least 67% bullish.  When those two things occur, our research shows market performance is strongest and least volatile.

The Recession Probability Index (RPI) has a current reading of 25.44, forecasting further economic growth and not warning of a recession at this time. The Bull/Bear indicator is currently 100% bullish. This means our models believe there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

Screen Shot 2017-02-13 at 8.59.54 AM

Weekly Comments & Charts

The S&P 500 finished the week positive and remains well above the support level that was set following the breakout in July last year. The most recent positive price movement snapped a narrow trading range experienced by the S&P 500, in which the Index had closed within a 1.75% range for 31 consecutive trading days. It appears that US equity markets are currently in an intermediate-term upward trend as many indices have reached new all time highs multiple times in recent weeks. The coming weeks should continue to give valuable insight about the near-term direction of the S&P 500, but it seems the sideways/downward pattern experienced from 2015 through mid-2016 has shifted to a more bullish pattern for now.

Screen Shot 2017-02-13 at 9.41.11 AM

US stock markets began the week on a slightly negative note again, but regained momentum after President Trump announced he would unveil information about his tax plan within the next few weeks.

Trump had been somewhat cautious when addressing the expectation of a tax reform in 2017, but he shifted gears on Thursday when he promised to announce a tax proposal in two to three weeks. Former Goldman Sachs president Gary Cohn is leading the effort to help create President Trump’s plan to restructure taxes. Though specific details about the plan have not yet been released, there is a general understanding of the broad objectives the administration is working towards.

Cohen has stated he is working on two key goals: cutting individual income taxes and cutting corporate income taxes. During his campaign, Trump pushed for a plan that would consolidate the current seven individual income-tax brackets to only three tax brackets, with the top rate being reduced from 39.6% to 33%. Trump also campaigned on a plan to cut the corporate tax rate to 20% and reduce taxes on overseas corporate earnings, resulting in more companies potentially returning money to America rather than keeping profits abroad to avoid paying the large tax liabilities. Under the current US tax law, companies can defer paying income taxes on their offshore profits until they return those profits back to the US.

Investors are becoming increasingly optimistic that lower taxes and higher infrastructure spending may be on the horizon, leading to increased US economic growth, but there are still many hurdles that must be cleared before this becomes a reality. Reforming the tax code is likely to be politically complicated, but the Trump administration seems to be making a major movement to begin the process.

While market trends and history are useful for study, there’s always more to investing than just the charts and trends.

As investors, we need to stay committed to our long-term financial goals. All the short-term news and market movements can be the most debilitating of all when it comes to making sound investment decisions; especially if we allow them to influence knee-jerk decisions.

More to come soon.  Stay tuned.

Regards,

Phil Calandra

The post 5 Minute Market Update – February 14, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

FormulaFolios Portfolio Recap – February 2017

In this recap, we cover the prior month and YTD performance, touch on current asset allocation of our tactical models, as well as the most up to date economic analysis of our proprietary economic model – the Recession Probability Index.

Regards,

Phil Calandra

The post FormulaFolios Portfolio Recap – February 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – February 7, 2017

Trust Dale CFGMarket Update

Equities: Broad equity markets finished mostly positive for the week with small-cap US stocks experiencing the largest gains. S&P 500 sectors finished the week mixed as defensive sectors generally outperformed cyclical sectors.

So far in 2017 technology, materials, and consumer discretionary are the strongest performers while telecommunications and energy are the only sectors with negative performance year-to-date.

Commodities: Commodities were positive for the week as oil prices increased 1.24%. Speculation regarding OPEC production cuts has pushed oil prices up since late November, but an increase in US production has given investors pause so far in 2017. Gold prices increased 2.56% as gold has reached its highest level since the beginning of November.

Bonds: The 10-year treasury yield remained flat at 2.49% as treasury and aggregate bonds finished the week slightly positive.

High yield bonds were positive as riskier assets performed well and credit spreads continued to fall.

Most indices are currently positive for 2017, with international stocks leading the way.

Screen Shot 2017-02-06 at 9.01.37 AM

Lesson to be learned: Fred Schwed Jr. once said “Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.” It can be difficult to avoid the urge of speculating about “hot” stock tips which can allegedly make you rich overnight. The truth, however, is markets often act in ways that are unforeseen. This is why it is important to maintain a smart and disciplined investment strategy while avoiding knee-jerk reactions based on daily market noise.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear).

In a nutshell, we want the RPI to be low on the scale of 1 to 100.  For the US Equity Bull/Bear indicator, we want it to read least 67% bullish.  When those two things occur, our research shows market performance is strongest and least volatile.

The Recession Probability Index (RPI) has a current reading of 25.44, forecasting further economic growth and not warning of a recession at this time. The Bull/Bear indicator is currently 100% bullish. This means our models believe there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

Screen Shot 2017-02-06 at 9.02.09 AM

Weekly Comments & Charts

The S&P 500 finished the week positive and remains well above the support level that was set following the breakout in July last year. The most recent positive price movement snapped a narrow trading range experienced by the S&P 500, in which the Index had closed within a 1.75% range for 31 consecutive trading days. It appears that US equity markets are currently in an intermediate-term upward trend as many indices have reached new all time highs multiple times in recent weeks. The coming weeks should continue to give valuable insight about the near-term direction of the S&P 500, but it seems the sideways/downward pattern experienced from 2015 through mid-2016 has shifted to a more bullish pattern for now.

Screen Shot 2017-02-06 at 9.03.35 AM

US stock markets began the week on a slightly negative note, but rallied on Friday to finish mostly positive for the second consecutive week.

Most US stock indices were negative through Thursday, but a strong jobs report helped push prices higher on Friday. January’s employment report showed payrolls increasing by 227,000, beating the expected figure of 171,000. This was the strongest jobs report since last September, suggesting the labor market may not be running out of steam yet, though many experts believe the economy seems to be at a mature stage of expansion.

While job growth was stronger than expected, the unemployment rate inched up from 4.7% to 4.8%. An increase in unemployment is generally a negative signal, but this can actually be taken as a positive sign for the US economy. The unemployment rate rose due to an increase in the labor force participation rate – signaling more people are searching for a job as they see the labor market strengthening. A healthy labor market is expected to continue through 2017, giving support to further US economic growth.

While market trends and history are useful for study, there’s always more to investing than just the charts and trends.

As investors, we need to stay committed to our long-term financial goals. All the short-term news and market movements can be the most debilitating of all when it comes to making sound investment decisions; especially if we allow them to influence knee-jerk decisions.

More to come soon.  Stay tuned.

Regards,

Phil Calandra

The post 5 Minute Market Update – February 7, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara